By Dee Dee Longenecker, Manager - Regulatory Affairs, John Staurulakis, Inc.

(Reprinted from NTCA's May/June 2011 Rural Telecom magazine)

Last year, Conterra Broadband Services, a wireless carrier headquartered in Charlotte, N.C., began aggressively marketing its services to several regional education service centers across Texas, including those in west Texas, where Big Bend Telephone Company operates.  "When Conterra came into our region and sold a few areas on their wireless broadband technology, suddenly all the schools in the region were talking about Conterra," said Rusty Moore, Big Bend's chief technology officer.  "The regional educational service centers had no idea what the small telcos could provide, or in many cases, were already providing."

Big Bend had worked diligently to establish a fiber network, but hadn't marketed itself as a foundation communications provider.  "We had almost become our own worst enemy. Many anchor institutions in our region had no idea of how our fiber network could benefit their business or that our network even existed," Moore explained.  Big Bend quickly reacted and started its own educational campaign about the benefits of its terrestrial network, and it paid off. 

As a result of their efforts, Conterra won four major E-rate contracts in Texas last year and is now providing service to 125 school districts in the state.  Thankfully, Big Bend lost only one school to Conterra.  "We are now providing gigabit Ethernet-capable services for our schools, and in some instances for other carriers in our serving territory, and no one even realized that we, as a small telco, were capable of providing such advanced service," added Moore. 

Unlike Big Bend, many of the rural telecommunications clients I've worked with over the past 13 years on both regulatory and marketing issues are not proactively participating in the E-rate program.  I highlight the word "proactively" to point out that nearly all my clients participate in the E-rate program, but few do so with intentional forethought.  Now, don't get me wrong - these companies go above and beyond to provide their communities - and especially their schools - with exceptional service and support.  However, I want to shine a light on an area where I see some alarming trends, and some distinct and important opportunities.

Schools, in order to receive E-rate funding on eligible services, must submit applications for service bids (Form 470s) with the Universal Service Administrative Company (USAC).  Historically, in ILEC serving areas, these requests often went unanswered because ILECs were largely unaware that these applications existed, and no other providers responded because they either couldn't or didn't provide service in that area.  Schools eventually just called up the ILEC and said, "hey - I need service!" and the service was provisioned, billed, and eventually, largely funded with E-rate dollars. Things operated on this status quo basis quite nicely for a lot of years. 

However, recently, as I've attended E-rate training sessions and assisted clients with various E-rate projects, I've observed an alarming trend.  Alternative service providers, such as VoIP providers, wireless carriers like Conterra and equipment vendors, have realized that schools are good targets for business, and these providers have aggressively begun marketing their products and services to school districts, educational regions, and even to municipal bodies. By my estimates, these providers have represented about 90 percent of the audience at USAC's E-rate training conferences for service providers, and based on the questions they ask and the comments they make, they closely monitor and rapidly respond to E-rate applications. Regrettably, I've witnessed more than one rural ILEC miss out on service opportunities because not only were they unaware that a school in their area had requested service through USAC, but they were also unaware that competition had arrived and was answering that school's request for a bid.  There is only one sure way to ensure that service opportunities are not missed, and that is for rural ILECs to stay in touch with their school and library customers, and monitor Form 470s filed by schools, libraries and consortia, like the regional education service centers, to keep a sharp eye on the lookout for opportunities. 

Monitoring Form 470s is not the only E-rate task that requires service providers to be proactive.  E-rate program participants, both on the service provider side and applicant side, have a lot of information to contend with, including tedious E-rate applications and corresponding state master contract procurement processes, regularly changing federal regulations, audit initiatives, and other regulatory considerations such as contract negotiations, record retention and marketing rules.  Big Bend and several other rural companies have restructured internal resources to find a home for E-rate activities.  As I've begun to monitor Form 470 applications for my clients and alert them of opportunities in their service areas, more of these companies are focusing their attention on better ways to manage E-rate activities and focus external marketing efforts with the schools. 

Eastex Telephone Cooperative, Inc., in Henderson, Texas, serves small 1-A schools with very limited resources and found that some of the schools were not participating in E-rate because they didn't fully understand the program or think they had the resources to comply with the various E-rate processes.  For this reason, Eastex determinedly focused new attention on the schools in its service area. "We have assigned people within our organization to help our schools and libraries understand what services we can provide and which of our services are eligible for E-rate discounts," said Rusty Dorman, Eastex's assistant manager.  "It is important to us to help our schools have the best technologies available so they can prepare students to be more competitive, seek higher education and be more prepared in the work force."

If Eastex's goals sound familiar, it is for good reason.  Since the introduction of the National Broadband Plan, the Federal Communications Commission (FCC) has set out to ensure that schools and libraries can better serve their communities with better access to services and higher broadband speeds.   In response, schools have set their sights on obtaining more bandwidth to support more interactive educational tools and connect facilities between campuses.  This means that schools are filing applications with USAC to request bids for better access services, like Ethernet Transport Service, or in some cases, dark fiber, which became an eligible service last fall.  Kenneth Ruark of Hill Country Telephone Cooperative, Inc. said, "Recently, the schools have requested large increases in the amount of bandwidth they require as more and more schools are using computers for teaching and even enabling the students to have laptops to take home."  Like many rural ILECs, Hill Country has deployed fiber throughout its network in recent years and has therefore been able to provide greater capacity to the 10 school districts spanning Hill Country's ILEC and CLEC service areas. 

Many small companies are receiving requests for fiber and fiber-based transmission services not only from their schools, but also from access customers.  Since dark fiber became an eligible service, many of the alternative service providers are eager to provide this service to E-rate applicants.  This has become a major cause of concern for many ILECs, especially those who have experienced significant access line loss in recent years.  As non-telecommunications vendors begin to provide dark fiber, regulated telcos have to work harder to ensure that they still have contact with the schools. Many telcos are concerned that they will be left providing only backbone network pieces, and no retail services. 

Along with these concerns, ILECs have to contend with considerations for how to treat leased dark fiber in their cost studies.  While dark fiber is now an E-rate eligible service, it is still considered a nonregulated service for accounting purposes.  This means that as ILECs stop providing regulated fiber-based transmission services, and instead begin providing dark fiber, they must work with their cost study advisors to ensure proper cost recovery adjustments are made. 

The best practice for addressing these varying E-rate concerns is for telcos to stay in touch with their schools, rapidly and thoroughly respond to school requests for service, and stay informed of program rules.  By assigning customer account representatives to regularly visit school technology officers, service providers can ensure that they are keeping the schools informed of available service options.  By staying abreast of E-rate program rules, service providers can ensure that while visiting their schools and libraries, they don't provide information that can be construed to unfairly influence bidding processes, or give gifts that are not allowed under newly defined FCC guidelines. 

Big Bend is a great example of a success story of this type of relationship.  The technicians from the educational service center have been amazed at how easy Big Bend made it to connect the various school districts.  "Thankfully, we weren't too late, and since then, we've received nothing but positive feedback about our service," Moore said.  "The schools want to support their local businesses, but they have to know what we can provide.  It's up to us to tell them what we've got to offer.  Now, we monitor Form 470s and are working on ways to internally structure resources to make sure opportunities to provide services so our schools don't get away from us."

E-rate Do's and Don'ts for Telcos

Consider the following brief list of E-rate program Do's and Don'ts as you work with your local schools:

• DO monitor Form 470s submitted by your local schools and respond appropriately
• DO check all information received from school and USAC
• DON'T help prepare, sign or submit a Form 470 for a school
• DON'T write a technology plan
• DO talk to schools throughout the year and provide neutral technology advice and information about the services you offer
• DON'T participate in the bid review and evaluation process
• DON'T provide free services or gifts to ensure bid selection
• DO seek assistance in ensuring that bids contain all applicable tariffed rates and charges
• DO seek assistance in developing contracts for schools and affiliate agreements, where necessary
• DON'T bundle eligible and ineligible services to hide ineligible costs
• DO keep a calendar of E-rate tasks to stay on top of deadlines ALL YEAR LONG

DO retain all E-Rate related records for five years from date of last service, and keep a record retention database per FCC rules